China beefs up imports as domestic cattle production continues to struggle

A new report by Rabobank shows that Chinese domestic beef production is having difficulty keeping up with demand for beef. Rabobank expects beef imports to grow between 15% and 20% each year for the coming five years.

“China became a huge importer of beef in 2013. According to official statistics, China’s beef cattle stock has been in continual decline since 2004, due to a lack of government support, low productivity, and the lack of farmers willing to invest in beef production, deterred by high costs and a shortage of labour,” according to Chenjun Pan, Rabobank Analyst.

Rabobank expects rising urban income levels and government support to spur a slow recovery, but not fast enough to catch up with accelerating demand. The structural supply deficit will force an increase in beef imports, including smuggled beef, of nearly 20% – or even double the current import volume by 2018.

China’s beef cattle supply shortage is a structural issue and the industry itself faces many challenges. It lags behind other major beef-producing countries in all the key aspects, such as genetics, breeding, productivity, farm management and grassland/feed resources. According to the report, the Chinese government will need to decide which agricultural products it wishes to maintain (or achieve) self-sufficiency in and which it will allow to be more exposed to imports.

Beef is not a strategically important agricultural product in China, although the government needs to keep a certain ratio of self-sufficiency to ensure beef supply to the Muslim population. Support for beef producers in China will increase but will remain lower than support for other livestock sectors, leaving beef producers to face the challenges of limited land, water and feed resources, the report states.

Given the great challenges facing the industry, Rabobank expects to see only marginal beef production growth in 2014 to 2015. Female cattle stock will be restored to a limited extent through government support. Production will likely see further increases between 2016 and 2018, assuming that the whole herd size benefits from the recovering female cattle stock in the previous years.

 

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